Summary:
- S&P 500 continues a primary advance.
- China respects primary support.
- ASX 200 continues to signal weakness.
- Momentum investors need to hold positions.
The S&P 500 retraced to test its latest support level at 1950 after a downward GDP revision for the first quarter. Respect indicates medium-term buying pressure — also evidenced by rising 21-day Twiggs Money Flow. Follow-through above 1970 would confirm a test of 2000*. Reversal below 1950 is unlikely, but penetration of the secondary trendline would warn of a correction.
* Target calculation: 1900 + ( 1900 – 1800 ) = 2000
The CBOE Volatility Index (VIX) remains low, indicative of a bull market.
The Shanghai Composite Index respected primary support at 1990/2000. 21-Day Twiggs Money Flow oscillating above zero indicates buying support, but this may be due to the managed “soft landing”. What we do know is that a fall below zero would definitely signal selling pressure. Breach of support would signal a decline to 1850*. The primary trend is expected to continue its downward path, but further ranging between 2000 and 2150 is likely. An abrupt fall is a fairly remote possibility.
* Target calculation: 2000 – ( 2150 – 2000 ) = 1850
The ASX 200 made a false break above 5470, but 21-day Twiggs Money Flow below zero warns of medium-term selling pressure. Breach of support remains likely and would indicate a correction to 5300. The long-term trend, however, remains upward. Support at 5300/5400 would offer a great entry point for long-term investors. Recovery above 5470 is unlikely at present, but would signal a test of resistance at 5550.
* Target calculation: 5400 + ( 5400 – 5000 ) = 5800
I repeat my warning from last week: Momentum investors should not attempt to time secondary corrections and need to endure the present volatility in order to reach their intended investment goals.